SB 695 — Incent Development Finance District Funding.

GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 2025 S 21 SENATE BILL 695 State and Local Government Committee Substitute Adopted 5/22/25 Short Title:

Senators Lazzara and Johnson (Primary Sponsors).

Rules and Operations of the Senate March 26, 2025 A BILL TO BE ENTITLED AN ACT TO GROW THE PROPERTY TAX BASE OF UNITS OF LOCAL GOVERNMENT BY FACILITATING PRIVATE DEVELOPER INVOLVEMENT IN CERTAIN PROJECT DEVELOPMENTS.

SECTION1.SECTION 1.

Article12ofChapter105oftheGeneralG.S. Statutesis amended byadding a new section to read:

"§105-277.1D 105-277.03.is reenacted as it existed immediately before its repeal and reads as rewritten:

Incentive"§ district105-277.1D. property tax exclusion.

(a)Inventory Classification.–Qualifieddevelopment (i)locatedinanincentivedistrict and(ii)held for sale by a builder is designated a special class of property undertax Sectiondeferral. 2(2) of Article V of the North Carolina Constitution and is taxable in accordance with this section.

Ninety(a) percentClassification. (90%) of the appraised value of property classified under this section is excluded from taxation.

Property– receivingA anresidencequalified exclusionimprovement under(i) thisconstructed sectionby maya notbuilder receiveand propertyowned taxby reliefthe underbuilder or a business entity of which the builder is a member, as defined in G.S.

105-277.02.105-277.2, (ii) located in an incentive district (iii) used for a purpose set forth in G.S.

(b)159-103 Definitions.is designated a special class of property under Section 2(2) of Article V of the North Carolina Constitution and is taxable in accordance with this section.

–For Thepurposes followingof definitionsthis applysection, ina this"residence" section:is anthe following definitions apply:

– An area (i) designated by a developer, (ii) submitted for approval to the governing body of the unit of local government in which the area is located, (iii) determined, by that governing body, to be an area for which theunit could applyforproject development financingdebt instruments pursuant to Article6Article ofChapter1596 of theGeneralChapter Statutes,159, and (iv) approved bybythe thegoverningbody governing body as an incentive district.

(2) Qualified development.improvement.

– LandAn andimprovement, anyunoccupiedother improvementthan byaremodeling, renovating, rehabilitating, or refinishing, by a builder to thereal land,property otherthat thanis remodeling,intended renovating,to rehabilitating,be orsold refinishingand existingused structuresas oran buildings.individual's residence, that is unoccupied, and for which a certificate of occupancy authorized by law has been issued.provided in this subsection.

(c)(b) Expiration.Deferred Taxes.

– TheAn exclusionowner authorizedmay bydefer thisthe sectionportion endsof attax imposed on real property that represents the earlierincrease in value of the following:property attributable solely to improvements resulting from the construction qualified improvement by the builder of a residence on the property.

(1)The Tendifference yearsbetween fromthe taxes due under this section and the timetaxes that would have been payable in the propertyabsence firstof receivedthis section are a lien on the real property taxof benefitthe providedtaxpayer byas thisprovided section.in G.S.

(2)105-355(a). Sale of the property.

(d)The Application.difference in taxes for the fiscal years year preceding the current tax year shall be carried forward in the records of the taxing unit or units as deferred taxes.

– The builderdeferred musttaxes applyforare thedue exclusionand underpayable thisin sectionaccordance aswith provided in G.S.

105-277.1F when the property loses its eligibility for deferral because of the occurrence of a disqualifying event.

A disqualifying event occurs when a certificate of occupancy is issued for the qualified improvement.at the earliest of *S695-v-1* General Assembly Of North Carolina Session 2025 (i) when the owner transfers the residence, (ii) when the residence is occupied by the owner or by someone other than the owner with the owner's consent, (iii) five years from the time the improved property was first subject to being listed for taxation by the owner, or (iv) three years from the time the improved property first received the property tax benefit provided by this section.

On or before September 1 of each year, the collector shall notify each owner to whom a tax deferral has previously been granted of the accumulated sum of deferred taxes and interest.

(c) Creditor Limitations.

– A mortgagee or trustee that elects to pay any tax deferred by the owner subject to a mortgage or deed of trust does not acquire a right to foreclose as a result of the election.

Except for requirements dictated by federal law or regulation, any provision in a mortgage, deed of trust, or other agreement that prohibits the owner from deferring taxes on property under this section is void.

(d) Construction.

– This section does not affect the attachment of a lien for personal property taxes against a tax-deferred residence.

(e) Application.

– An application for property tax relief provided by this section should be filed during the regular listing period but may be filed after the regular listing period upon a showing of good cause by the applicant for failure to make a timely application, as determined and approved by the board of equalization and review or, if that board is not in session, by the board of county commissioners.

An untimely application approved under this subsection applies only to property taxes levied by the county or municipality in the calendar year in which the untimely application is filed.

Decisions of the county board maybe appealed to the Property Tax Commission.

Persons may apply for this property tax relief by entering the appropriate information on a form made available by the assessor under G.S.

G.S.This act is effective for taxes imposed for taxable years beginning on or after July 1, 2025.

105-277.02Page is2 amendedSenate byBill adding695-First aEdition new subsection to read:

"(e) Property receiving an exclusion under this section may not receive property tax relief under G.S.

105-277.03." *S695-v-2* General Assembly Of North Carolina Session 2025 SECTION 3.

G.S.